Tuesday July 12 2016

Mortgage Market Commentary

By Al Bowman

Sponsored by

Tuesday's bond market has opened in well in negative territory as profit-taking and stock gains continue to pressure bonds. The Dow is currently up 77 points while the Nasdaq has gained 31 points. The bond market is currently down 16/32 (1.48%), which should push this morning's mortgage rates higher by approximately .125 of a discount point.

Today has no relevant economic data for us to watch, but we do have the first of this week's two Treasury auctions that have the potential to affect mortgage pricing. 10-year Notes will be sold today and 30-year Bonds go tomorrow. If the sales are met with a strong demand from investors, particularly today's sale, we could see afternoon improvements in bonds that could lead to downward revisions to mortgage rates. However, if buyers stay on the sidelines, we may see bonds fall after results are posted and mortgage rates move higher. Results should be announced at 1:00 PM ET, so any reaction will come during early afternoon trading.

Besides the 30-year Bond auction, the only thing we will be watching tomorrow also comes during afternoon trading. The Federal Reserve will release its Beige Book report at 2:00 PM ET tomorrow. This report is named simply after the color of its cover, but it is considered to be important to the Fed when determining monetary policy during their FOMC meetings. It details economic activity and conditions by Fed region throughout the U.S. If there are any significant changes in conditions since the last update, we could see afternoon moves in the markets and mortgage rates. Signs of weakness should translate into bond strength and better mortgage rates.

We also need to watch corporate earnings as the quarterly reporting season starts this week. We can watch the stock markets for their reaction to the results. Strong earnings usually translates into stock strength and weaker bonds that push mortgage rates higher. If the major names report softer than expected earnings, stocks should falter and bonds should benefit. As bond prices rise, their yields and mortgage rates move lower. So theoretically, weaker earnings reports are good news for mortgage shoppers.

If I were considering financing/refinancing a home, I would....Lock if my closing were taking place within 7 days...Lock if my closing were taking place between 8 and 20 days...Lock if my closing were taking place between 21 and 60 days...Float if my closing were taking place over 60 days from now...This is only my opinion of what I would do if I was financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Previous Commentary

About the author

Al Bowman began his residential lending career in 1986 and has shared his expertise with mortgage shoppers on the internet since 1994. With an expertise in residential loan origination and underwriting, Al's work also appears on a weekly basis in local and regional newspapers. He is well known for his ability to translate complex economic data into laymenís terms so that the average mortgage shopper can understand how and why mortgage rates change from day to day.